The cost of cheap (or subsidised) advice.

Did you know that most of the financial planning/wealth management industry is owned by large financial services institutions, such as banks and fund managers?

5_Financial our approachThis is just one of the ways 5 Financial is different. We are 100% Australian-owned by people who work in our practice. As a result, we are free to explore a wide range of options to find investments that best suit our clients’ needs – with no bias or influence exerted by an institution.

And this brings us to the question of fees.

Some financial planners whose firms have links to large institutions are sometimes able to offer fees that sound quite cheap. You have to wonder, however, are these fees subsidised by profits made through the sale of the institution’s products to the client?

Big financial institutions regularly declare massive profits, and the cost of preparing financial strategies for clients has to come from somewhere.

The reality is that it takes considerable time to develop a customised financial strategy that:

a)     Drills down to get to the fine detail of what someone wants to achieve, and

b)     Charts a pathway that helps them get from where they are now to where they want to be as efficiently and cost effectively as possible.

This makes the case for their low fees somewhat dubious. We believe the client pays – it’s just not necessarily transparent.

And if the strategy developed for the client favours investment products from the adviser’s institution, our belief is that the client pays for their ‘cheap’ advice twice: firstly in fees built into the cost of the institution’s products that are recommended, and secondly in missed opportunities by not having access to a wider range of options.

For us, it all comes down to the saying that, ‘you get what you pay for’.

At 5 Financial, we happily disclose upfront any fees we charge to prepare a personalised financial strategy for you. This is because we know the effort that goes into creating a quality strategy and we’re confident about the tremendous value it offers.

We’re also proud that our wealth management arm, 5 Wealth Management Pty Ltd, has its own Australian Financial Services and Credit Licence (AFSL).  This means we are at liberty to research the entire market to come up with products and strategies that are a great match with each client’s needs.

It’s in line with our desire to help our clients gain financial clarity and peace of mind – and a truly personalised service.

And one final point: if you are speaking with a potential adviser, do be sure to ask them who their firm is owned by, even if their firm does not sound like a bank or fund manager. If they say they are part of a dealer group, ask them who owns the dealer group, and whether it has any links with financial institutions. The answer may have a strong bearing on the strategy that’s developed for you.

So to summarise, if you’re offered a ‘cheap’ financial strategy, it’s wise to think hard about the quality of what you’ll get in return, and what it may ultimately cost you.

If you’d like to know more about our approach, please book a free initial consultation with one of our financial advisers. This consultation is at no cost or obligation, and it will give you the opportunity to discuss your goals and learn about how we can help you to become clearer and more confident about your financial arrangements.

2018-01-22T08:14:32+00:00 November 4th, 2015|